Recently a discussion popped up in the forums discussing the end of credit card rewards. The discussion was spurred by an article from the NY Times (thanks Krozfan!).
In the article, the author mentions that:
…Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit. Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
I am skeptical
While I know credit card companies are going to have to cut costs, I am going to be surprised to see them start charging annual fees and eliminating rewards programs. The rewards programs are one of their most enticing pieces of bait that they have. While some people do walk away with “the reward” and benefit, there are more that ending paying 5 times as much in interest. Which of course makes it a profitable activity for the credit card company.
The article states, “major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time.”
The companies do have to find a way to stop giving away so much to those who are “winning” at the credit card game, but I am not sure if eliminating the credit card rewards programs is the answer.
What if they do eliminate them?
If I am wrong, and the credit card rewards programs are eliminated and the interest grace period is shortened – why would anyone want to have one? Sure there will always be the people who want them just so they can spend money they don’t have, but it seems that many people who know the dangers of credit cards, get lured into them by the reward and incentive offers.